Bain & Co. has put a number on China’s luxe lull.
According to a report released this week by the consulting firm, luxury spending in China has slowed significantly. Bain estimates that luxury sales in Mainland China grew by just 2 percent in 2013, compared with 7 percent growth a year earlier. The consultancy said men’s wear and watches were particularly hard hit, with sales of luxury timepieces falling 11 percent.
“The highly visible government campaign encouraging frugality and focusing on corruption had a large impact on gifting, which had been one of the major growth engines of the sector,” the firm said about its 2013 China Luxury Goods Market Study.
Bain expects the trend to continue through 2014, which is unsurprising given the high profile President Xi Jinping’s regime has put on anticorruption efforts. Thus far, however, the clampdown does not appear to include China’s top leadership and its own ties to family fortunes gained through political connections.
China needs to make tangible, bold economic moves very soon to ensure its citizens and trade partners the new government is serious about reform, leading scholars and analysts said at a conference in Beijing this week.
Well-known Chinese academics and executives from major companies and organizations gathered in the capital at the annual Caixin Summit, a forum on critical issues hosted by China’s leading independent business magazine. The two days of discussion focused on the potential for reform in the Communist Party of China’s newest leadership team, led by President Xi.
Though the central government has signaled it will undertake several new policy directions, it has yet to establish any timetables or new legal framework nearly a year into its tenure.
Most critically, the speakers said, any new reforms must tamp down on China’s widespread systemic government corruption.
Outgoing U.S. Ambassador to China Gary Locke on Thursday spoke about the importance of building rule of law and of a functioning, independent judicial system to China’s credibility in the worlds of international business and trade.
“People need to know the rules will be applied equally no matter who you are or how much power you have,” Locke told the gathering.
Locke laid out for listeners how American-style adherence to rule of law and an independent judiciary have helped build trust in the government system. In particular, Locke said, “what business people are not willing to accept is arbitrary rule of law.”
China’s court system does not operate independently from the rest of government, and it is long fraught with the taint of corruption. Both Chinese citizens and companies tend to be skeptical the court system will produce fair, unbiased outcomes.
“How does a society build confidence in the integrity of its legal system?” asked Locke. “The answer is, steadily. It takes years.”